UK: Leasehold and Freehold Reform Act 2024

Why should I read this?

Following the grant of Royal Assent on 24 May 2024, the Leasehold and Freehold Reform Bill became the Leasehold and Freehold Reform Act 2024 (“LFRA”). 

Part of the purpose of this Act (as stated in its opening wording) is to:

“amend the Building Safety Act 2022 in connection with the remediation of building defects and the insolvency of persons who have repairing obligations relating to certain kinds of buildings”.

This briefing focuses on the implications of these amendments to the Building Safety Act 2022 (“BSA”) which will be of interest to insolvency practitioners and other insolvency market participants.

What are the changes?

Repeal of section 125 BSA

Practitioners will be aware of section 125 BSA (Meeting remediation costs of insolvent landlord). This provision contains an ability for an insolvency practitioner acting in relation to the winding-up of an insolvent landlord company, which is, pursuant to the BSA, under an obligation in respect of remedying relevant defects, to make an application to court. Pursuant to such an application, the insolvency practitioner could seek an order requiring a company or partnership that is associated with the insolvent landlord company to:

• make such contributions to the insolvent landlord company’s assets as the court considers to be just and equitable; or
• to make such payments to a specified person as the court considers to be just and equitable

Pursuant to section 118 of the LFRA, section 125 of the BSA is repealed. There has been some doubt as to its practical application, including precisely which insolvency processes are within its ambit (for example whether, in addition to winding-up, it also applies in administration situations) and how any payments received into the insolvency estate pursuant to section 125 are to be allocated (for example, whether they fall to be applied to remedy relevant defects or to be applied to the general pool of assets of the insolvent estate). Such uncertainty may have been a factor in the Government’s decision to repeal section 125; having only come into force in 2022, it has been a short lifespan on the statute book for this particular provision.

New section 125A BSA imposing reporting obligations on insolvency practitioners

Another change to the BSA which is being implemented is the introduction of a new reporting requirement for insolvency practitioners. This is contained in a new section 125A of the BSA which is titled “Notifications by insolvency practitioners”. It applies where an insolvency practitioner is appointed in relation to a responsible person for a higher-risk building or a relevant building.

The information must be given to the relevant local authority and the relevant fire and rescue authority; and where the insolvency practitioner has been appointed to an accountable person for a higher-risk building, the information must also be given to the Building Safety Regulator (part of the Health and Safety Executive).

The information which is to be provided is set out in section 125A(6) and is:

• the name and address of the person in relation to whom the insolvency practitioner is appointed
• the address of each higher-risk building or relevant building for which the person is a responsible person
• an official copy of the register of title and title plan relating to each registered estate or interest the person holds in such a building, if any
• the nature of the practitioner's appointment
• the practitioner's name, address, telephone number and email address (if any)
• so much of the information set out in the table in rule 1.6 of the Insolvency (England and Wales) Rules 2016 (S.I. 2016/1024) as is known to the practitioner

The required information must be provided by the insolvency practitioner within the period of 14 days from the date of their appointment – insolvency practitioners will therefore need to be ready to move swiftly if in a situation to which section 125A applies. In terms of the type of office-holder to which these provisions apply, section 125A(8) states that for the purposes of section 125A, “insolvency practitioner” means:

• an administrator
• an administrative receiver
• a receiver appointed by the courts or by a mortgagee
• a liquidator
• a trustee in bankruptcy

It is noteworthy that the reporting obligation is expressed in the legislation as a mandatory obligation, yet the statute is silent on the consequences of non-compliance. It will be interesting to observe how market practice develops in this regard.

Pursuant to section 124 LFRA, the changes described above became effective on 24 July 2024.

Why does this matter?

The BSA is a complex piece of legislation which has wide-ranging implications, including for those operating in the insolvency realm. Participants in the insolvency market will need to be alive to the BSA, and in particular the forthcoming changes set out in the LFRA.

How Eversheds Sutherland can assist

It should be noted that the BSA contains detailed definitions, and it is beyond the scope of this briefing to delve into these. Specific legal advice should be taken as to the applicability of the BSA to any particular situation. 

Should you require advice on how these amendments to the BSA might impact you, Eversheds Sutherland can leverage its market-leading strength and depth of experience in this area to assist. For more information or guidance, please get in touch with your usual Eversheds Sutherland contact, or one of the individuals below. You can also visit our Building Safety Act Insights page.